Minimizing Risk

By Kin Talk on Friday, September 20, 2013 with 0 comments

How to Minimize Your Risk

No investment advisor likes to admit it, but no stock picking system is perfect. Sometimes, the stocks we think will explode, don’t. Sometimes, the stocks we feature lose money.
There may not be a foolproof system to predicting the stock market, but we do have a foolproof system for managing risk. ChartAdvisor follows one of the safest risk reduction systems available.
Using these three simple steps, you can reduce the risk in your stock picking plan:

Three Ways to Take Risk Out of the Stock Market

  1. Screen Your Picks.
    This might seem obvious, but patterns that look like they are developing into predictable trends do not always follow through. After combing over thousands of stock charts a day, ChartAdvisor will often not fetures a single stock.

  2. Get In. Get Out.
    ChartAdvisor
    preaches setting realistic target exit prices for all stocks. We lock in high returns while the stock is high, and we get out before the market has a chance to change its mind.
  3. Set Tight Stop Losses.
    This step is absolutely critical to minimizing your risk in the stock market. If a sure-fire winner turns out to be a fizzled-out dud, your system needs to have a built-in, abandon-ship trigger. That is, you need to know when to cut your losses and move on to brighter prospects.
ChartAdvisor sets its stop-loss trigger around 3%. So if a trade starts to go sour, you will almost never lose more than 3% of your investment.
“I am glad I took a second look at ChartAdvisor. I keyed in your data from the 2nd of Feb 04 into a spread sheet with 20% of capital allocated to each symbol and came up with the 38% annualized return which is better than a poke-in-the-eye-with-a-sharp-stick, considering "the market" has been a sideways affair since the starting date.
What I must mention is how inspired and relaxed I am after an in-depth study of your real trading account making that amount of return... I can more fully appreciate the much-lectured "cut your losses short now", seeing just how early it pays to get out when the trade goes against you, rather than the "give-it-room" systems I have tried."
-P. Cameron, New Zealand

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